Weiss v. Smulder

Facts

Weiss (P) was visiting the Garden of Light grocery store. Smulders (D) asked P if he thought that Garden of Light's granola could be packaged for wholesale distribution. P responded that, if properly packaged, the product potentially could do well. D indicated to P that he would need P's assistance in this area and that he had approached P because of P's olive oil marketing campaign. After numerous conversations, they agreed to work to distribute the granola products. In August 2003, the parties discussed working together as two separate companies to produce and distribute the granola products. D also indicated that they would merge their companies to form a new enterprise if that relationship proved successful. P formed Food Works to distribute Garden of Light's granola products. Garden of Light and Food Works executed a written 'Master Distributorship Agreement' the purpose of which was to designate Food Works the exclusive distributor of granola products produced by Garden of Light. The distribution agreement expressly acknowledged that the parties had entered into discussions with respect to the formation of a new company. D made repeated representations to P that he would spin off his bakery business from Garden of Light, merge it with Food Works, and that he and P would be equal partners in the new company, which they referred to as 'NEWCO.' P put his olive oil business on hold to focus primarily on the granola products business, expending many hours on marketing and research. P also paid a brand manager $14,000 to promote that business. P and D began labeling the granola products with the trade name Bakery on Main. While Food Works purchased and distributed Garden of Light's granola products, P and D continued to maintain their separate companies. In September 2006, D sent an e-mail that he would not merge companies. D also asserted that Food Works was not in compliance with the distribution agreement because it had failed to compensate Garden of Light for products that had been purchased for distribution. After Food Works failed to make full payment within the thirty day period, Garden of Light formally terminated the distribution agreement. P sued D for breach of oral contract and promissory estoppel as to D and breach of written contract as to Garden of Light; and negligent misrepresentation, intentional misrepresentation, and unjust enrichment as to both defendants. Ds alleged breach of contract and fraudulent misrepresentation. The court found in favor of Ds on all of P's claims except promissory estoppel. The court found in favor of Ds on all of P's claims except promissory estoppel. The court found that Ps had met their burden of establishing that D made promises regarding an eventual merger of their two companies and that P acted in reliance on those promises to his detriment. The court found that Ds had met their burden of establishing that Ps breached the distribution agreement by failing to compensate Garden of Light for products that Ps had purchased for distribution, but found in favor of Ps on Ds' claim of fraudulent misrepresentation. The court awarded Ds $110,463.50 in principal and interest for the breach of the distribution agreement. The court found that P was entitled to one half of the $14,000 that he had paid to the brand manager to promote the granola products, as he would have benefited from one half of those services as a partner in NEWCO. P was also entitled to the value of a 50 percent share of NEWCO, but that neither party had offered sufficient evidence to demonstrate the value of NEWCO. The court ordered the parties to return to court to present additional evidence on that issue. The trial court granted Ds' motion, reversing its decision to allow the parties to introduce additional evidence on damages. Both parties appealed. Ds claim in part that the court improperly allowed P to recover because the claim contradicted the fully integrated distribution agreement.

Issues

Rule of Law

Holding and Decision

Legal Analysis

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